Broadcom sees bullish views at Citi after OpenAI deal

[Broadcom headquarters in Silicon Valley]
Sundry Photography

Citi raised the price target on Broadcom's (NASDAQ:AVGO [https://seekingalpha.com/symbol/AVGO]) stock to $415 from $350 after the chipmaker and Microsoft (NASDAQ:MSFT [https://seekingalpha.com/symbol/MSFT])-backed OpenAI (OPENAI [https://seekingalpha.com/symbol/OPENAI]) announced [https://seekingalpha.com/news/4503609-broadcom-surges-after-openai-deal-for-10-gigawatts-of-custom-ai-accelerators] a collaboration for 10 gigawatts of custom AI accelerators on Monday.

The firm maintained a Buy rating on Broadcom's stock.

Analysts led by Christopher Danely said that while Broadcom did not provide an estimate, they believe this deal could be worth $100 billion and $8.00 in EPS over the next few years. The analysts expect the first shipments to start towards the end of 2026 and continue through 2029.

The analysts noted that OpenAI has announced a total of 26 gigawatts of capacity so far and their AI analyst Heath Terry estimates a cost of about $50B per gigawatt, which would translate to $1.3 trillion in cumulative capital expenditure by 2030. Heath estimates OpenAI revenue to grow from around $12.5B in 2025 to $163B by 2030.

Danely and his team believe that the $10B customer that Broadcom disclosed in fiscal third quarter earnings is likely xAI.

The analysts are modelling Broadcom's AI business to more than quadruple from about $22B in 2025 (33% of sales) to $85B (65% of sales) in 2027.

MORE ON BROADCOM AND OPENAI

* Wall Street Lunch: Broadcom Surges On Deal With OpenAI For Custom AI Accelerators [https://seekingalpha.com/article/4829559-wall-street-lunch-broadcom-surges-on-deal-with-openai-for-custom-ai-accelerators]
* Microsoft: Time To Outshine The Rest Again (Upgrade) [https://seekingalpha.com/article/4829520-microsoft-time-to-outshine-the-rest-again-upgrade]
* Microsoft: Margins Will Hold Despite Higher CAPEX Outlook [https://seekingalpha.com/article/4829286-microsoft-margins-will-hold-despite-higher-capex-outlook]
* OpenAI, Salesforce team up across enterprise work and commerce [https://seekingalpha.com/news/4503856-openai-salesforce-team-up-across-enterprise-work-and-commerce]
* Broadcom to launch networking chip Thor Ultra; unveils Wi-Fi 8 solutions [https://seekingalpha.com/news/4503826-broadcom-to-launch-networking-chip-thor-ultra-unveils-wi-fi-8-solutions]